People could pay their friends by text under a banking revolution proposed today.

Sajid Javid, the new Financial Secretary to the Treasury, unveiled plans to radically reform the UK’s bank payment system. He announced a new regulator will be set up to end the big banks’ domination of the network which deals with more than 17 billion non-cash payment transactions a year.

Ministers want to make it easier and cheaper for smaller banks to use the payment system — to improve services with new technologies and cut fees for consumers. Examples they gave to transform how payments could be made in future include:

People in Sweden being able to pay friends by text, without knowing their account detail, to split a restaurant bill or for another purchase.

Cash machines in Spain which “float” out from the wall that are easy to use for disabled people. The ATMs have a 19-inch touch screen for transactions and a frosted panel privacy shield.

Making payments online in Holland without needing to enter card or account details.

Mr Javid said: “The Government is determined to open up competition in the banking sector so that it serves the needs of the British economy, businesses and customers.

“The reforms we are announcing will encourage innovation, ensuring that real benefits are passed on to each and every user of financial services.”

The remit of the Ofgem-style regulator will be to increase competition in the bank payments network.

It will be able to order changes to how payment systems such as Faster Payments or Bacs work.

The Treasury highlighted new technologies that could be adopted including the ‘Swish’ app which was launched last year by Sweden’s major banks, Danske Bank, Handelsbanken, Länsförsäkringar Bank, Nordea, SEB and Swedbank.

It allows people to transfer money in real time, using their mobile phone, to other individuals.

To use it, people connect their mobile number with their internet banking service, and then download the Swish service to their phones.

The new regulator, which will come under City watchdog the Financial Conduct Authority, will be set up through amendments to the Banking Reform Bill.

Following the uproar over the scrapping of cheques, it will also have to ensure the needs of consumers are properly considered when changes are made.

“No longer will decisions be made that serve the big banks’ interest and not the people of this country,” said a Treasury source.

Financial institutions that flout the regulator’s rulings will risk fines and other sanctions.